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Under Federal Law No. 26 of 1981 (the “Old Maritime Law“), creditors often arrested ships in the UAE for certain claims for which charterers, and not the owners, were liable, even after the charter had ended or the vessel had been sold. As discussed below, under Federal Decree By Law No. 43 of 2023 (the “New Maritime Law“), vessels can still be arrested for certain claims against bareboat and time charterers, but only during the period of the relevant charter, not after its termination.
Ships are subject to arrest in the UAE for certain causes of action falling within the definition of “maritime debts” as set out in Article 53(2) of the New Maritime Law. A fairly broad category of claims fall within the definition of “maritime debts”, including but not limited to claims for damage done by a ship, injuries/casualties, salvage, towage, pilotage, crew wages, general average, carriage and charterparty disputes, disputes regarding ship sale/ownership/possession/mortgage, etc.
Creditors can arrest the ship in respect of which the maritime debt arose and in certain circumstances, sister-ships (it is not permissible to arrest a sister-ship for certain maritime debts, such as disputes arising under a mortgage or ship sale contract or relating to ownership/possession of the ship or the rights/profits resulting from its use). Article 54(1) of the New Maritime Law provides (quoted in translation):
“Holders of the debts described in Article 53(2) of this Decree-Law may apply for [arrest] of the ship to which the debt relates or [arrest] of any other ship owned by the debtor, in the event that the ship is owned thereby at the time of [arrest] application, even if the ship was prepared for a voyage.”
It will be apparent that sister-ships can only be arrested if owned by the (maritime) debtor at the time of filing the arrest application. The position was different under the Old Maritime Law, where the sister-ship also had to be owned by the debtor at the time the maritime debt arose.
However, insofar as the arrest of the vessel in respect of which the maritime debt arose is concerned, there is no requirement that that vessel be owned by the maritime debtor at the time of filing the arrest application. Therein lies the rub. In the UAE, creditors have often sought the arrest of ships in respect of which a maritime debt had arisen notwithstanding the vessel having been sold in the intervening period, and even though the maritime debt is not one of the defined “preferred debts”, akin to liens, set out in Article 29 (Article 84 of the Old Maritime Law), which “follow the ship wherever it may be found”.
Whilst this position has not necessarily changed insofar as maritime debts for which the owners of the vessel were responsible – those vessels will still be subject to arrest notwithstanding an intervening sale – the New Maritime Law has made an important amendment to the position which prevailed under the Old Maritime Law as concerns arrests for maritime debts arising while a vessel is subject to a bareboat, and arguably, time, charter, and for which the charterer is solely responsible. Article 55(1) provides (quoted in translation):
“The creditor may request [arrest] of the ship during the period of the charter or on any other ship owned by the charterer, if the navigational management of the ship is performed by such a charterer, and the charterer is solely responsible for a relevant maritime debt. No Prejudgment [arrest] may be imposed on any other ship belonging to the owner of the chartered ship to which the maritime debt relates.“
The words “during the period of the charter” in Article 55(1) of the New Maritime Law were added to the corresponding provision (Article 117(1)) of the Old Maritime Law, with the effect that the New Maritime Law is more restrictive regarding the right to arrest a vessel after the charter has terminated for a maritime debt for which the charterer (with navigational management of the ship) is solely liable.
With respect to the question of whether a time charterer has “navigational management” of a ship, Article 151(2) of the New Maritime Law, which relates to time charters specifically, provides (quoted in translation):
“It may be agreed that the charterer issue instructions on the ship's navigational management to the person in charge of managing the ship, so that the shipowner shall ensure that the person in charge of managing the ship abides by the instructions issued by the charterer, and in which case, the ship's navigational management shall be transferred to the charterer.“
As is common in time charters, the charterer generally has the right to order the vessel to safe ports subject to agreed trading limits. In the circumstances, it is arguable that the time charterer has “navigational management” of the ship for the purposes of Article 151(2) and by extension, Article 55(1) of the New Maritime Law.
The argument that a bareboat charterer has “navigational management” of the ship should not be controversial and so under the New Maritime Law, it will not be permissible to arrest a vessel after the relevant charter has terminated for a maritime debt for which the bareboat or time charterer (with navigational management of the ship) is solely responsible.
This will obviously affect the position of certain categories of claimants, for example, bunker suppliers, who in the past were able to arrest vessels in the UAE for maritime debts for which time charterers were responsible even after the charter had ended, and sometimes, even after the vessel had been sold. This should give qualified relief to owners who are often threatened with, or suffer, the arrest of their vessels for maritime debts for which former charterers of the vessel are liable. However, it should be remembered that creditors can still arrest the ship during the period of the charter or any other ship owned by that charterer.
It should also be noted that it is possible that a creditor, in genuine ignorance of the current status of a charterparty, could apply for the arrest of a vessel referring only to the provisions of Article 54(1) of the New Maritime Law. Owners faced with an arrest of their ship in such circumstances would have to challenge the arrest by relying on Article 55(1) to argue that the relevant charter had terminated before the arrest application was filed. A creditor who obtains the arrest of a vessel with prior knowledge of the termination of the charter risks a potential claim for wrongful arrest if the owners can prove that the arrest order was obtained maliciously or in bad faith.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
